Innovation-driven productivity growth: the role of ICT capital and effective labour (D5.5)

This paper assesses the importance of information and communication technology (ICT) and other intangible assets, such as research and development (R&D) and organizational capital (OC) for labour productivity. For this purpose, a rich employer–employee panel data set of Norwegian firms covering the period 2008–2019 is used, including detailed occupational data.

To operationalize the concepts of R&D capital and OC, the paper applies novel GLOBALINTO measures of investments in R&D and OC that are based on firm-level wage costs related to specific skills and occupations. The paper further explores the interactions between ICT capital and labour skills by incorporating innovation-biased technical change (IBTC) as a factor in a neo-classical production function. The analysis is provided for selected industries in manufacturing and services.

Overall, all three types of intangible capital seem to be important for productivity, with ICT having clearly the highest impact. Positive interaction effects between (a high level of) ICT capital and (high) shares of workers engaged in either R&D-, organizational- or ICT-related activities at the firm level are estimated. The estimates, however, vary widely across industries.

Read the paper here.